New breed of PM/PA offers one-stop shopping, accountability and cost control. William J. Walsh ~ President Walsh Associates Monday, 27th October 2003

Project managers and purchasing agents offer a new advantage when planning renovations.

The world of project management has come full circle. Today, a hotel owner wanting a renovation can work with a project manager/ purchasing agent (PM/PA) who provides the advantage of single-source responsibility for the renovation’s quality, schedule and cost.

Once, hotel owners performed all their own renovation project management and purchasing duties. Then, seeking a cost-effective way to streamline the process, they turned to legions of specialized consultants — an architect/designer, project manager and purchasing agent. Now, hotel owners are seeking out a handful of companies that provide one-stop shopping — with project management and purchasing abilities combined into a single entity.

Rise of the Consultants
In the early days of franchising, the franchisor continued to provide technical services to its franchisees. Often, the franchisee was required by contract to use the flag’s technical services department. Fees were high, product cost expensive and the service so-so at best. It worked great for the flag, but not so great for the franchisee.

Franchisees revolted and insisted on going their own way. They agreed to adhere to the flag’s standards, but refused to accept the flag’s large overhead cost, high fees and mediocre service. The franchisees believed they could do it faster, better and cheaper — with equal or better quality. An industry of designers, purchasing agents and project managers sprang up to meet their needs.

The owner was then managing a team of consultants, whereas previously, the flag provided one-stop shopping.

REITs also grew by developing a new type of client, the “asset manager.” These institutional owners were strictly owners with little or no in-house technical support. The asset manager, often with solely a financial or operations background, was responsible for managing capital projects. The asset manager was concerned with bottom line — not only income. Capital projects that drive revenue (but provide little or no return) may benefit the manager, but not the owner. Thus, the asset manager needed technical expertise working for his best interest.

All these changes in hotel economics — franchising, REITs, corporate layoffs — led to the creation of an industry of architects, interior designers, project managers and procurement agents servicing independent and institutional hotel owners.

Back to Basics — But Better
Today, the corporate customer (e.g. the asset manager) is stretched thin. Institutional owners and asset management companies have reduced their staffs, asking the remaining managers to do more with less internal resources. So, they go outside for help.

In an effort to distinguish themselves from the competition, procurement firms are expanding their offerings. “The typical hotel renovation is so furniture, fixture and equipment (FF&E) intensive that it’s logical for procurement firms to offer project management,” says Scott S. Piccone, vice president of Cornerstone Real Estate Advisers Inc. “Fees are discounted because of the PM/PA’s efficiencies. Budget and schedule forecasting is more accurate and faster. The project is easier for us to manage.”

A project manager who understands FF&E in addition to construction costs has the numbers at his fingertips and has ownership of the problems.

“We like working with a PM/PA,” says Jeffrey Ornstein of J/Brice Design International. “Often the project suffers when the PM & PA don’t communicate properly. And when — not if — a problem arises, it’s easier to get to a solution. The PM/PA knows the project in its totality. ”

Jay Weiss, president of Digney York Associates, a major national hotel renovation contractor, says that single- source responsibility benefits the general contractor, too. “The whole job revolves around the FF&E. It seems many purchasing agents today either don’t know or don’t care what we go through on the jobsite. Most PAs have never been on a construction site. But a PM/PA firm, with on-site representation, better understands the schedule and the critical importance of coordination, timely deliveries and good communication.”

Not everyone can do it. Specialized expertise is required to both manage the project and procure the FF&E. However, by consolidating these services, the hotel owner no longer handles the responsibilty for the renovation.

Note:
William J. Walsh.
Since creating his namesake business in his home’s “spare bedroom” back in 1994, William Walsh has created a well-respected company that has worked on some of the industry’s most significant hotel projects. Handling project management and furniture, fixture and equipment (FF&E) purchasing for major hotel construction and renovation projects, Walsh Associates has managed over $100 million in projects and purchased in excess of $80 million in FF&E during it’s eight years of existence. eMail: william.walsh@walshworks.com